The real estate industry is mired in a thick fog.
The COVID-19 crisis has produced a dense murkiness of uncertainty and confusion. Are the shifts in property use temporary or permanent? Should we be starting, pausing or cancelling our project? Should we divest to mitigate potential losses? Or should we look for acquisition opportunities – and maybe potential partners to manage real estate investment risk?
With the pandemic impacting every province and municipality differently, both from a restriction/policy and an economic perspective, the effects on real estate markets will vary across the country. In light of this, and the serious risks of potential missteps in the coming months, it has never been more important to ensure you make decisions about your properties and real estate strategies based upon reliable information and good real estate industry data.
The COVID-19 crisis has reinforced the essential role of good data. People around the world continually hunt for trustworthy information about the virus. To stay safe, we look to the experts for reliable and consistent data.
Governments, the health care sector, business leaders – all seek good data based on fact-based evidence to gain a clearer picture of what is unfolding and to make appropriate real-time, real-world decisions.
Good data: History + consistency + governance
So, what exactly is “good data?” Good data is information that can be trusted – data that includes three essential components: history, consistency, governance.
History
This relates to objective research and analysis over a long period. Fact-based, multi-sector, multi-market data that has been consistently researched across major markets produces a comprehensive, realistic picture, which enables decision makers to confidently choose a course of action.
Consistency
This relates to methodology, frequency and standardization – values and methods consistently applied over time.
Governance
Among the three components of good data, governance is the most important. Interpreting outcomes and formulating strategies is only possible when you can trust that the data upon which you base these, is accurate. Appropriate data governance policies are essential for producing reliable data; these protect the integrity of the data by ensuring it is collected, structured, transformed and delivered based on best practices.
In today’s abruptly different real estate environment, making decisions requires understanding and managing high-stakes risk. This necessitates gathering fact-based evidence, verifying with real-life experience and carefully analyzing both.
Here are 4 ways this kind of good data can contribute actionable insights for your critical business decisions in the new real estate marketplace.
Learn from the past
Stay current
Benchmark performance
Future-proof your assets
1. Learn from the past
Understanding what has happened can help you now and in the future.
Looking at historical trends, past performance on vacancy, asset performance, project launch performances, impact on pro formas and success stories about projects that worked and why they did – all of these data – can help you determine what to do with your assets. What are my real estate investment risk factors and how do I mitigate them? Should I sell a property? Should I postpone a development? Should I look at new opportunities?
This is an important time. As the COVID-19 outbreak accelerated and the marketplace transformed, we begin to learn from what the current data is telling us about the behaviour of the commercial and residential real estate markets.
It can also be helpful to analyze the data in terms of another crisis – the 2008/2009 financial crisis. Financial institutions collapsed, people lost their jobs, and commodity markets suffered huge losses.
Today, our world is quite different. Financial institutions are intact, businesses and employees are being supported by the government. And in many cases, technology is enabling businesses to thrive and employees to continue working. Recuperation will slowly take shape.
By looking at what happened during past crises, economic cycles and other periods of rapid change – as well as the recent past of the COVID-19 crisis, what’s happening now, and what is different – we can distinguish between temporary conditions and real trends that will impact product demand and supply. This will be invaluable information for real estate owners, developers and investors when preparing for the months and years ahead.
2. Stay current
The level of uncertainty in the economy makes the trajectory of recovery challenging to forecast.
When change is moving at such a rapid pace, information soon becomes outdated. Assembling data frequently can reduce investment risk by facilitating the ability to act at the right time, rather than too late or too early.
Since the COVID-19 situation shifts dramatically on a weekly, even daily basis, being on top of the latest real estate transactions and trends is essential for making strategic decisions about a property or portfolio. In the residential sector, for example, owners, developers and investors need to understand what’s happening with land transactions, new developments, and new home sales and pricing.
Having local data is also crucial because the implications of COVID-19 vary markedly from one geographic area to another. Changes in the development pipeline, office demand and lease transactions, space absorption, vacancies, dispositions and sublease inventory, performance of the flexible-space market, repricing of existing space – such local data are important indicators in providing a clearer understanding of the factors influencing assets and development projects.
Local data should include real, lived experience – information gathered from a range of stakeholders in a relevant market through surveys and conversations. This ensures real estate decisions are not based on “gut feeling” or anecdotes or intuition of decision makers, which presents a narrow, and riskier, perspective.
3. Benchmark asset performance
Performance of assets can have significant bearing right now for many residential and commercial real estate stakeholders. Developers who want to time new projects. Investors who need to know the impact of COVID-19 on cash flow projections. Portfolio holders who must assess conditions to divest or capture value.
By benchmarking your real estate assets with comparable properties in the same market, you can eliminate emotion and speculation from decision making and reduce the risks of making the wrong calls.
Are you above or below the market on vacancy? How are other projects performing at launch? Combining pertinent benchmarks with thorough data analysis enables you to draw actionable intelligence from multiple points of data. This provides a robust foundation for well-informed decisions regarding whether and when to buy, sell, launch or transform properties.
4. Future-proof your assets
Real estate owners, developers and investors must do more than simply adapt to the coronavirus environment. This is the time to rethink the future – because it could be the right time to take bold action to strengthen your position in the market and future-proof your assets.
How will the uses and built forms of assets change? Office space? Shopping malls? Condominiums? Hotels? Does our residential building need to accommodate work-from-home space? Do our office buildings need to be reconfigured for new safety protocols? Should we change our planned condo project to mixed use? And how should we integrate “prop tech” – emerging information technologies used to design, construct, manage and use properties – to address these new challenges?
With the right real estate industry data and analysis, a wealth of disparate information can become a clear decision point to tackle these challenging issues and future-proof your assets.
To facilitate quicker decision-making, application programming interfaces (APIs) are now being used to enhance the efficient and effective use of data. Using APIs, real estate stakeholders can pull data from third-party providers into your own databases. This enables you to acquire rich data and to aggregate and analyze it in your own environment, with your own or other third-party data.
New technologies are enabling our entire industry to become more data-driven. We are better able to learn from the past. To stay current. To assess our performance. To future-proof our assets.
To achieve all of this, we must ensure that we use good data that is based on sound evidence and experience and combined with thorough analysis.
Whether you own, develop, service, lend, supply or govern, with trustworthy data you can make well-informed decisions that will ultimately benefit every stakeholder in the real estate industry.
Author
Altus Group
Author
